SCO Energy Club: structure ready for international interaction, not Shanghai Six’s elite club
19.09.2013 12:16

Even though economic cooperation has been declared the most important track for the SCO, it remains the least developed area in the organization’s activities. This is also true for such a fundamental sector as energy. Yet objective prerequisites for intensifying energy cooperation between the SCO countries are quite favorable.

The aggregate area of the organization’s member states takes up three fifths of Eurasia, with a population of over 1.5 billion people. Their aggregate GDP equals one fourth of the world’s total ($12.4 trillion). The territory of the SCO member states holds about 25% of global oil reserves, over 50% of gas reserves, 35% of coal and about half of the world’s known uranium reserves. The biggest oil and gas pipelines have been laid or are being built here.

So, the SCO comprises both countries that are big energy producers and importers. On the one hand, this makes them internally dependent on each other, but on the other, it creates the basis for multilateral interaction. The SCO Energy Club could provide a suitable platform for such interaction.

The idea of setting up this structure was first voiced by Russian President Vladimir Putin at the SCO summit in Shanghai in June 2006. In the past seven years, the SCO member states have repeatedly gone back to this initiative and held several forums devoted to the setup and activities of the future Energy Club. At the recent SCO summit in Bishkek, President Putin once again confirmed the need to launch practical work of the SCO Energy Club. He said it would create additional opportunities for implementing promising energy projects between the SCO member states, observers and dialog partners. Kazakhstan’s President Nursultan Nazarbayev agreed with him. “We consider it necessary to set up the SCO Energy Club, which would directly address problems in the sector,” he said. “No one will resolve them for us.”

Russia and Kazakhstan are the most active in addressing the issue. On request from the secretariat of the SCO Business Council, leading expert institutes of the Russian Academy of Sciences have got involved in drafting the concept of the SCO Energy Club. Experts believe that the Energy Club format would allow jointly finding ways to resolve such pressing issues as:

• coordination of energy strategies and long-term programs for development of the SCO member states and observers and their partners;

• drafting and implementation of measures of collective energy security;

• development of a system of transport energy communications;

• development of a joint economic mechanism for implementation of the member states’ energy policies;

• coordination of the member states’ investment plans;

• information coordination;

• mutual informing about activities on the global energy market.

The setup of the SCO Energy Club should contribute to deepening interaction between energy producers (Russia, Kazakhstan, Uzbekistan and Iran) and energy consumers (China, Tajikistan, Kyrgyzstan, India, Pakistan and Mongolia) and become the first step towards shaping a common energy system both in the regional and global contexts. Given the instability of the global economy and the dependence of its recovery on the economic growth pace in China and India, which are net energy importers, a more active energy policy on the part of the SCO could play a significant part in ensuring a sustainable growth of the SCO member states’ and observers’ economies and would also have a positive impact on the world economy in general.

The SCO Energy Club is being created first of all to establish and conduct an expanded dialog on improving energy security, streamlining energy strategies, coordinating efforts and comprehensive discussion of the prospects of cooperation in different sectors of the energy industry in the interests of the SCO member states.

But the Energy Club’s activities cannot be limited to these general tasks if it is seen not as an elite club for the select six member states, but as a structure ready to interact with different countries, international organizations and business communities. The broader the range of the SCO Energy Club’s participants, the greater benefits it will bring the organization’s member states: they will include the possibility to attract attention to their problems and investment opportunities, to find optimal partners based on the interests of their own development, etc.

Experts have different opinions on the configuration and format of the Energy Club. Some believe that it should be a fairly rigid association at the supranational level, which envisages delegating certain sovereign powers to it. Others (the majority) propose going from simple to complicated, i.e. finding points of tangency without going too far ahead and jumping the gun.

In our understanding, the Energy Club, the setup of which is finally beginning to get a shape after numerous failed attempts, should proceed from real possibilities and willingness for an informal exchange of opinions among as big a number of interested parties as possible. The SCO has the necessary official bodies that make coordinated decisions, but nevertheless, multilateral economic cooperation still remains the least developed area in the organization’s activities. We view the Energy Club’s task as creating the atmosphere of openness and trust in discussing relevant economic and legal problems, free exchange of opinions on ways to resolve them, first of all at the expert level, not restricted by the rigid limits of accepted procedures. Eventually, such free discussions can result in specific proposals for government structures authorized to make the necessary and economic decisions.

At the initial stage of the Energy Club’s setup, it would be worth announcing that membership is not obligatory even for the SCO Six. After all, the previous attempts to set up the Energy Club failed to a large extent due to lack of consensus among the member states, first of all Uzbekistan. However, Article 16 of the SCO Charter allows bypassing this alleged obstacle. It reads, among other things, “In case one or other member states are not interested in implementation of individual cooperation projects that are of interest for other member states, these member states’ refusal to participate does not prevent the interested member states from cooperation and at the same time does not prevent the specified member states from joining such projects later.”

The club format allows expanding the range of experts participating in the Energy Club’s events as much as possible. Apart from the member states, observers and dialog partners, it would be useful to brief countries that are members of international organizations with which the SCO has cooperation agreements and – via mass media – the broad global energy community of the club’s agenda and upcoming events, giving them the opportunity to participate in the Energy Club’s work. This, of course, will require certain organizational measures and financial spending, but the multiplying effect will by far make up for this.

The Energy Club can become an association of energy suppliers, transit countries and consumers. It can also become a coordinating body that would contribute to the development of economic and energy ties between states and companies. At present, such interaction can be based on the edited Program of Multilateral Trade and Economic Cooperation, which was adopted by the SCO heads of government. The main areas of activity in the energy sector could be:

• modernization of existing generating capacities and power grids;

• development of transport infrastructure in the region;

• joint development of new hydrocarbon fields and geological exploration;

• creation of conditions for mutual access to electricity markets and its transit;

• energy saving and energy efficiency;

• training and advanced training of energy specialists.

Alongside these general areas of cooperation that can serve as targets when creating the agenda for debates at the Energy Club, it would be rational to search for and discuss new projects in such areas as power engineering, deep processing of hydrocarbons, nuclear power generation and hydropower generation.

During broad discussions, their participants may see the need to shape a common SCO energy space, which will require coordination and certain streamlining of the SCO member states’ energy strategies. Before taking these proposals to the SCO’s governing bodies, they should be discussed in detail within the Energy Club. Overall, issues of the SCO members’ energy strategies, their monitoring and regular updates should, we believe, be constantly present on the Club’s agenda.

In the long run, shaping of a common SCO energy space will require political decisions on such issues as price liberalization, unifying of energy transportation tariffs, working out of a common tax base, coordination of activities at the suppliers’ level in order to avoid useless competition between them. To resolve these and related problems, the SCO countries may use the experience of Russia, Kazakhstan and Belarus in setting up the Eurasian economic space.

Staying realistic, we should not hope that the Energy Club is destined to succeed only due to some objective prerequisites. The previous attempts to set it up have shown that this is not so. No matter how interesting are the theoretical problems of economic and energy cooperation in the SCO for participants of discussions within the Club, long-term stable interest in the platform on the part of business structures will sustain only if there are specific bilateral and multilateral projects guaranteed with both investment and political support.

So the activities of the Energy Club should be harmoniously included in the sphere of the SCO member states’ inter-government relations, including the setup of a system of regional security and its important component, energy security. Given the ongoing instability of the global economy, the SCO’s proactive energy policy would play an important role in ensuring sustainable growth of the organization’s member states and would also become a positive factor in the global economy.